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All major APAC, European, and US equity indices closed lower. US
and benchmark European government bonds closed lower on the day.
European iTraxx closed wider across IG and high yield, CDX-NAHY was
also wider, and CDX-NAIG was flat on the day. Natural gas closed
higher, the US dollar and copper were flat, and oil, gold, and
silver were lower on the day.
Please note that we are now including a link to the profiles of
contributing authors who are available for one-on-one discussions
through our Experts
by IHS Markit platform.
Americas
All major US equity indices closed lower; S&P 500 -1.1%,
DJIA/Nasdaq -1.2%, and Russell 2000 -1.6%.
10yr US govt bonds closed +2bps/1.43% yield and 30yr bonds
+4bps/1.86% yield.
CDX-NAIG closed flat/53bps and CDX-NAHY +3bps/311bps.
DXY US dollar index closed flat/96.55.
Gold closed -0.6%/$1,795 per troy oz, silver -1.1%/$22.29 per
troy oz, and copper flat/$4.29 per pound.
Crude oil closed -3.0%/$68.61 per barrel and natural gas closed
+3.9%/$3.83 per mmbtu.
Two doses of the Pfizer and BioNTech vaccine Comirnaty were
found not to generate sufficient levels of immunity in children
aged two to under five years, the company said in an update on 17
December. The conclusion is based on a pre-specified immunogenicity
analysis conducted on a subset of the study population one month
after the application of second dose. The study, which is ongoing
and remains blinded, also includes children aged 6 to 24 months, in
whom immunogenicity was found to be non-inferior to that observed
in people aged 16 to 25 years. The study did not identify any
safety concerns associated with the administration of two 3 µg
doses in young children. The amount of the vaccine being tested in
this age group is much smaller than the doses approved for adults
(30 µg) and older children (10 µg). Following the review, the
company has decided to test a third 3 µg dose across the entire
study population from six months of age. Contingent on positive
results of the three-dose regimen, regulatory filings are currently
planned in the first half of 2022. Pfizer and BioNTech are also
planning to evaluate a third 10 µg dose in the older pediatric
group of children aged 5 to 12 years. (Life Sciences by
GlobalData's Ewa Oliveira da Silva)
IHS Markit forecasts global light-vehicle sales to increase
3.7% and production to increase 9.0% in 2022. Next year, global
light-vehicle sales and production volumes are forecast to still be
below the levels of 2019, as the recovery cycle from the COVID-19
pandemic has been held back by supply constraints and new virus
variants. Auto demand levels are expected to remain depressed on
the microchip shortage, as well as the race between vaccination
programs and new COVID-19 variants. Although the supply situation
is expected to improve through 2022, the ability to replenish
inventories may not come before 2024. IHS Markit expects the
semiconductor shortages and wider supply chain disruptions to
continue until 2023. IHS Markit projects light-vehicle sales
globally of nearly 79.4 million units in 2021. We forecast new
light-vehicle sales of nearly 82.4 million units globally in 2022
and auto industry demand to continue to be constrained next year as
the challenges in the semiconductor supply chain remain. Global
light-vehicle production is expected to be 75.5 million units in
2021, a paltry 1.2% improvement over levels in 2020. However, in
2022, IHS Markit forecasts a rebound in global light-vehicle
production of 9.0% to 82.3 million units. (IHS Markit
AutoIntelligence's Stephanie
Brinley)
US corn growers, furious about skyrocketing costs for phosphate
fertilizers, have accused leading domestic producer Mosaic with a
plot to derail foreign competitors with punishing trade
tariffs—a move they say handed the world's second largest
phosphate fertilizer producer undue influence over US fertilizer
supply and thus pricing. (IHS Markit Food and Agricultural Policy's
William Schulz)
In a December 17 open letter to Mosaic executives, leaders of
the National Corn Growers Association (NCGA) say Mosaic's petition
to the US International Trade Commission (ITC) for countervailing
duties (CVD) against fertilizer producers in Russia and Morocco was
nothing more than a feigned act of corporate social
responsibility.
"Mosaic has almost single-handedly erected an insurmountable
tariff barrier to keep its top competitors in Morocco and Russia
out of the US phosphate market," reads the NCGA letter. "Thanks to
Mosaic's petition, only 15 percent of phosphorous imports now come
into the US without tariffs. And experts say that using [the
Department of Commerce] and ITC to manipulate the supply curve does
indeed dictate price to farmers."
The NCGA is not alone in its price-gouging accusations. "The
economic conditions of the fertilizer sector suggest market abuses
are likely, and farmers are experiencing a price squeeze that is
highly suspicious in its timing," the Family Farm Action Alliance
said in a December 8 letter to the Department of Justice's
Antitrust Division.
But ITC investigated Mosaic's charge that foreign producers
were competing unfairly by dumping low-cost phosphate fertilizer
product on the US market and artificially lowering prices. In June,
the agency issued a CVD on Moroccan and Russian phosphate
fertilizer imports due to unfair foreign subsidies.
"Based on the available pricing data obtained by the Commission
… cumulated subject imports undersold the domestic like product in
16 of 52 quarterly comparisons with margins of underselling ranging
from 0.1 percent to 13.0 percent and an average underselling margin
of 2.8 percent," an ITC's report says. "Subject imports oversold
the domestic like product in the remaining 36 instances with
margins of overselling ranging from 0.1 and 11.2 percent and an
average overselling margin of 4.0 percent."
GM announced two milestones for its Ultium electric vehicle
(EV) platform programmes on 17 December, making the first
deliveries of BrightDrop vans to transport and delivery services
company Federal Express and producing the first saleable GMC Hummer
EV pick-up truck. The first BrightDrop vans delivered were the
EV600, comprising five units of a 500-unit. GM's BrightDrop
commercial delivery vehicle business was formed less than a year
ago, and GM says the EV600s were the fastest-built vehicles from
concept to market in the company's history. In addition, GM
reconfirmed that the Cadillac Lyriq is the company's next EV due
for production, during the first half of 2022 at the Spring Hill
assembly plant in Tennessee (United States). The speed with which
GM was able to develop the BrightDrop vans and the GMC Hummer EV
suggests that the Ultium platform and architecture can support the
faster overall product development times planned by GM. With
shorter times to bring products to the market, GM may be in a
position to more quickly expand its EV product portfolio. (IHS
Markit AutoIntelligence's Stephanie
Brinley)
Electric vehicle (EV) manufacturer Nikola delivered its first
battery electric trucks on 17 December, supplying the Tre trucks to
Total Transport Services Inc for a pilot programme in the US state
of California, according to a company statement. Total Transport
Services is a port trucking company, specifically serving the ports
of Los Angeles and Long Beach. The announcement follows Total
Transport Services Inc signing a letter of intent for the purchase
of 100 zero-emission trucks from Nikola, with the agreement
beginning with the delivery of four trucks for a pilot scheme,
comprising two battery electric trucks and two fuel-cell EVs. Under
the agreement, depending on the performance of the "pilot trucks",
delivery of 30 EVs is due in 2022 and delivery of 70 fuel-cell EVs
(FCEVs) is to start in 2023. (IHS Markit AutoIntelligence's Stephanie
Brinley)
Peru's monthly GDP declined by 1.2% month on month (m/m),
according to the National Institute of Statistics and Information
(Instituto Nacional de Estadistica e Informatica: INEI). This
result may differ from the forthcoming figure from the Central
Reserve Bank of Peru (Banco Central de Reserva del Perú: BCRP),
whose monthly output indices IHS Markit uses to conduct forecasts.
(IHS Markit Economist Jeremy Smith)
Monthly output increased by 4.6% year on year (y/y), explained
by the weak comparison base in 2020.
Construction, which plunged by 4.7% m/m, drove the October
result. Construction activity had been as much as 22% above the
pre-COVID-19 pandemic mark in March but has since moderated
significantly. The sector confronts multiple headwinds, including
the withdrawal of fiscal stimulus, rising input costs, and weak
overall business sentiment.
Apart from the mining sector, all major economic sectors are at
or above their pre-pandemic peak. Services continue to recover as
COVID-19 vaccination progresses and daily infections remain at low
levels.
During the third quarter of 2021, Argentina's seasonally
adjusted GDP increased by 4.1% q/q after decreasing by 0.9% q/q in
the previous quarter, according to the revised figures. On an
annual basis, GDP grew by 11.9% year on year in July-September on
the back of a low comparison base in the third quarter of 2020 when
GDP shrunk by 10.2% y/y because of COVID-19-related response
measures and extreme lockdown. (IHS Markit Economist Claudia
Wehbe)
The estimate for the GDP deflator shows a rise of 54.1% y/y,
while the private-sector consumption deflator increased at a slower
rate of 50.1% y/y during the same period.
By sector, the primary sector showed the only annual decline in
the third quarter. All other sectors posted annual growth in the
double digits, except for utilities, whose cost increases are
controlled by the government, education, financial intermediation,
and real estate and business services.
Sectors with a severely depressed comparison base posted an
annual growth rate over 25% y/y, such as construction, hospitality
and restaurants, and non-profit and social services. Activity in
the hospitality and restaurant sector was nearly half the size
compared with the first half of 2018. Meanwhile, manufacturing
gained 12.7% y/y.
IHS Markit's forecast for 2021 has been adjusted upwards to
7.5%, expecting the sudden increase in public-sector spending to
gain the population's trust before the November 2021 mid-term
election to have a marginal bump in GDP in the last quarter of the
year, paired with strong external demand for manufactured goods of
agriculture origin. The economy is not projected to return to
pre-pandemic levels until the second half of 2023.
Europe/Middle East/Africa
All major European equity indices closed lower; France/Spain
-0.8%, UK -1.0%, Italy -1.6%, and Germany -1.9%.
10yr European govt bonds closed lower; Germany/Spain +1bp,
France/UK +2bps, and Italy +3bps.
iTraxx-Europe closed +1bp/52bps and iTraxx-Xover
+7bps/260bps.
Brent crude closed -2.7%/$71.52 per barrel.
Supermarkets across Europe have pledged to remove beef products
that are linked to deforestation in Brazil from their stores. On 15
December, US activist group Mighty Earth announced that six
European supermarket chains will stop selling Brazilian beef
products after an investigation found that these products
contribute to the destruction of the Amazon rainforest. The most
far-going pledge came from Lidl Netherlands, which said it would
stop sales of all beef originating from South America in January
2022. Albert Heijn, the largest supermarket chain in the
Netherlands, said it will stop sourcing beef from Brazil entirely.
(IHS Markit Food and Agricultural Policy's Pieter Devuyst)
Other supermarket chains made less dramatic moves and decided
to focus on specific beef products. Sainsbury's UK said will stop
sourcing its store brand corned beef from Brazil and highlighted
that 90% of its beef is already sourced from the UK and Ireland.
Auchan France will remove beef jerky products linked to Brazilian
meat processor JBS from its shelves, while Carrefour Belgium and
Delhaize will stop selling Jack Link's brand beef jerky.
The withdrawals came after an investigation by Mighty Earth and
Reporter Brasil, a Brazilian NGO, found that JBS indirectly sourced
cows from illegally deforested areas, in a scheme known as "cattle
laundering". In such schemes, cows are raised on illegally
deforested land and then sold on to a legitimate farm before being
sent to the slaughterhouse, to obscure the true origin of the
cattle.
In reaction, JBS said it has zero tolerance for illegal
deforestation and has blocked more than 14,000 suppliers for
failing to comply with its policies. The company said monitoring
indirect suppliers - the ones before the final seller to the
slaughterhouse - is a challenge for the entire sector, but it
promised to set up a system capable of doing so by 2025.
Mercedes-Benz has reached agreement with its European dealers
to transition to an agency model, reports Automotive News Europe
(ANE) citing information from Mercedes-Benz. With the agency model,
customers buy directly from the automaker rather than the dealer.
Dealers would receive a fee per vehicle sold, and as well as
revenue from after-sales services. The agreement with the European
Association of Mercedes-Benz Dealers, or FEAC, creates a framework
to introduce the change, which would affect passenger cars and
vans. The agency model is expected to be rolled out in Germany and
the UK by 2023, according to the report. Britta Seeger, Daimler
management board member responsible for sales, was quoted as saying
that by the end of 2023, more than half of new Mercedes-Benz
vehicles available in Europe "should be sold under the agency
model." Daimler CEO Ola Källenius said to ANE in an interview in
June that the agency model would be put in place in a number of
European countries, as part of a wider digital transformation of
the selling process. Pilot projects have been conducted in Austria,
Sweden, and South Africa, according to the automaker. The agreement
with FEAC will speed up Mercedes-Benz's plan to transform its
distributional network in the UK and Germany to place the carmaker
itself at the center of the car-selling process. The agency model
will not only reduce costs for consumers, it will also enable the
automaker to establish direct contact with customers and streamline
the selling process by the introduction of the latest online
shopping tools. With more electric vehicles (EVs) joining
automakers' product lines, the agency model will also facilitate
automakers' efforts to roll out software and digital services to
customers to tap new revenue opportunities. The Volkswagen (VW)
Group, for instance, has already adopted an agency model for the VW
ID series EVs. (IHS Markit AutoIntelligence's Abby Chun Tu)
Swedish battery developer Northvolt is racing to meet the 2021
timeline for its new battery plant, according to Reuters.
Northvolt's chief executive officer (CEO) Peter Carlsson, said, "We
are working extremely intensely right now to keep that schedule,
and even if it means the first battery is made on New Year's Eve,
it's going out this year". The Li-ion battery is the first to be
built in the European Union (EU) by a European company. The company
plans to produce enough batteries to power 1 million electric
vehicles (EVs) annually. Northvolt also aims to open at least two
more factories in the next 10 years. As well as launching this
battery plant, Northvolt has recently signed a binding joint
venture (JV) agreement with Volvo Cars to develop and manufacture
batteries together for the automaker's next-generation vehicles.
(IHS Markit AutoIntelligence's Nitin Budhiraja)
MAN Energy Solutions will supply compressor system for the
carbon capture and storage (CCS) plant at the HeidelbergCement
Norcem cement factory in Norway. The project will utilize Aker
Carbon Capture's proprietary carbon-capture technology. From
mid-2024, 400,000 tons of CO2 will be captured annually from the
cement factory in Brevik, corresponding to 50% of the factory's
overall emissions. The CO2 will be compressed and liquefied with
technologies from cooperation partners, Aker Carbon Capture and MAN
Energy Solutions, and then transported by ship to an underground
storage location. (IHS Markit Upstream Costs and Technology's Kamila
Langklep)
MAN Energy Solutions and Aker Carbon Capture signed a
technology-cooperation agreement in December 2020 to develop
energy-efficient compression solutions for CCS applications with
heat recovery. The cement factory in Brevik will be the first to
use the Carbon Capture Heat Recovery technology (CCWHR®) developed
through this partnership. The new process allows the heat emerging
from the compressor system to be recovered and used as steam to
meet approximately one third of the total heat demand from the Aker
Carbon Capture plant. Consequently, the system solution demands
significantly less energy compared with conventional carbon-capture
technologies.
The scope of work by MAN Energy Solutions includes the supply
of an electrically-powered compressor train—type RG 63-7 with
integrated CCWHR® technology—which allows the compression heat
of the recovery compressor to be exploited. The steam generators
cool the CO2 mixture between the compressor stages and generate
steam that is in turn used for capture.
Using digital tools, the compression system for the CCS
application has been significantly simplified. The
digital-twin-based engineering approach of MAN Energy Solutions has
resulted in system optimizations. The dynamic process simulation
showed that originally planned system components, including
heating, valves, and additional pipes for safe plant operation,
were not required. The time taken for a cold start of the plant can
thus be reduced from around 12 hours to 20 minutes.
During its monetary policy session on 14 December, the Monetary
Policy Council of the National Bank of Hungary (MNB) raised the
main policy rate by 30 basis points to 2.40%, the highest level
since May 2014. The MNB has been tightening policy since June for a
low of 0.60% in a bid to rein in spiking inflation amid a fast
economic recovery. The MNB also raised the rate on its overnight
deposit facility by 80 basis points to 2.4%. In addition, the bank
ended its quantitative easing program. (IHS Markit Economist Dragana
Ignjatovic)
On 16 December, the MNB raised its one-week deposit rate by 30
basis points to 3.6% at a weekly tender - the sixth increase in a
month. Since 16 November, the central bank has raised the rate by a
cumulative 180 basis points.
Following the meeting, the MNB Deputy Governor Barnabas Virag
pledged more rate rises for next year to anchor rising inflation
expectations. He declared that the bank was prepared to front-load
the tightening in what he described would be a long campaign
against inflation.
Despite the hawkishness displayed by the MNB in the second half
of the year, Hungary's consumer price inflation has continued to
soar beyond the 2-4% target set by the central bank. In November,
consumer price inflation reached a 14-year high of 7.4% y/y, driven
by soaring energy and food costs. In the first 11 months of 2021,
consumer prices averaged 4.9% compared with the same period of
2020.
UAE-based car-sharing platform Ekar has expanded its operations
to Thailand, reports The National News. The company will offer its
car subscription service, which provides cars from one to nine
months for a single monthly subscription cost with no down payments
via the app, in Bangkok starting in January 2022. The company will
also launch its peer-to-peer car sharing services, which allow
people to rent their own cars to the general public, later in 2022.
Ekar is a startup company founded in 2016 in the United Arab
Emirates, which operates a pay-as-you-drive hourly and daily car
rental service. The company has booked over 1.33 million trips with
over 250,000 customers in seven cities across the Gulf Cooperation
Council (GCC) region. The company operates in the UAE and Saudi
Arabia and will introduce the service in Malaysia soon, with the
latter scheduled to be launched in Egypt and Turkey in 2022. (IHS
Markit Automotive Mobility's Surabhi Rajpal)
Asia-Pacific
All major APAC equity indices closed lower; Australia -0.2%,
Mainland China -1.1%, South Korea -1.8%, Hong Kong -1.9%, India
-2.1%, and Japan -2.1%.
An independent Chinese-Russian financial system may benefit
China's energy trade with Iran, said three petrochemical traders in
Asia, responding to news that China and Russia are working on this
project. Such a system will facilitate the settlement of trade,
which has been an issue in the past, said a trader based in
Singapore. (IHS Markit Chemical Market Advisory Service's Chuan
Ong)
"It has been tricky for Chinese importers bringing
petrochemicals, such as methanol, from Iran. First tier banks in
China are jittery about financing these, leaving no choice but
third or fourth tier banks," said the trader.
China has been a key outlet for Iranian energy exports but it
has not been an easy road, the trader said.
A Zhejiang Province-based trader said Russia can help settle
trades between Chinese and Iranian parties in this trading system
down the road.
"I don't dare to import Iranian cargoes now. One's source of
funding will be hurt by sanctions. And then one will lose one's
cargo as well. It's a double whammy," said a trader based in
Shandong Province.
The Kremlin announced last Wednesday that Russia and China will
develop a shared financial structure to deepen economic ties,
Russia's state-controlled media outlet RT reported.
This move followed warnings to Russia that it could be severed
from the Brussels-based SWIFT financial system as a form of
sanction. The SWIFT payment platform supports the majority of
international transactions.
The U.S. can seek to block any objectionable transactions using
the U.S. dollar on the SWIFT network, such as those involving
sanctioned countries like Iran.
Russian President Vladimir Putin and Chinese President Xi
Jinping spoke last Wednesday highlighting the need for an
independent financial infrastructure to service trade between
Russia and China, which cannot be influenced by third countries,"
RT reported Putin's foreign policy advisor as saying.
China has reportedly proposed to amend legislation to allow
ride-hailing drivers and food delivery workers to form unions.
Beginning in December, China will evaluate an update to its trade
union legislation with plans to add rules to broaden the types of
organizations and jobs for which unions may be formed, reports
Reuters. (IHS Markit Automotive Mobility's Surabhi Rajpal)
The Indian union cabinet has approved a production-linked
incentive scheme (PLI) worth over INR760 billion (USD9.9 billion)
for production of semiconductors over the next six years, reports
The Economic Times. Under the new scheme, called Programme for
Development of Semiconductors and Display Manufacturing Ecosystem,
over 20 semiconductor design, components manufacturing, and display
fabrication units will be set up including one to two fabrication
units for displays and 10 units each for designing and
manufacturing components. The government will offer incentives to
companies involved in the manufacturing of silicon semiconductor
fabs, display fabs, compound semiconductors, silicon photonics,
sensors fabs, semiconductor packaging, and semiconductor design.
Additionally, the cabinet also approved a plan for the
modernization and commercialization of the Semi-conductor
Laboratory (SCL). The launch of the scheme comes at a time when
automakers are struggling with the semiconductor shortage globally
and have been forced to adjust production levels since several
months ago. By localizing development and production, the Indian
government aims to reduce dependence for such chips on other
countries. (IHS Markit AutoIntelligence's Isha Sharma)
Indonesia's tech firm GoTo Group has reportedly appointed
underwriters to manage its initial public offering (IPO). According
to the report by Reuters, GoTo Group is expected to launch its
USD1-billion IPO as early as the first quarter of next year. The
company has initially planned to launch a local IPO, with a US
listing expected to follow. Indonesia is keen for its tech startups
to sell shares on the local exchange and has established guidelines
allowing multiple voting shares to pave the way for IPOs. GoTo
Group is an internet firm created through a merger deal between
ride-hailing company Gojek and e-commerce provider PT Tokopedia.
The merger was aimed at supporting Gojek and Tokopedia in efforts
to take on larger, regional rivals such as Grab and internet
company Sea, which operates e-commerce platform Shopee. (IHS Markit
Automotive Mobility's Surabhi Rajpal)
Baker Hughes has been awarded a contract by Santos to supply
turbomachinery equipment for the Moomba carbon capture and storage
(CCS) project (Moomba CCS), including gas turbine, compressors, and
heat recovery steam generator (HRSG). The project will serve a gas
processing plant and permanently store 1.7 million tons of carbon
dioxide (CO2) annually in depleted natural gas reservoirs in the
onshore Cooper Basin in South Australia. (IHS Markit Upstream Costs
and Technology's Kamila Langklep)
Specifically, Baker Hughes will provide PGT25+G4 aeroderivative
gas turbine (nameplate power capacity of 34 MW), MCL compressor and
BCL compressor, which will enable Santos to compress CO2 captured
at Moomba CCS for transportation and subsequent injection for
storage.
Baker Hughes' broader carbon capture, utilization, and storage
(CCUS) portfolio features advanced turbomachinery, solvent-based
capture processes, well construction and management for CO2
storage, and advanced digital monitoring and industrial asset
management solutions.
The contract for Baker Hughes' technology lays a foundation for
Santos' future objectives of decarbonizing natural gas, lowering
emissions and ultimately producing hydrogen fuel using stored CO2.
A final investment decision on the Moomba CCS project was reached
in November 2021.
Posted 20 December 2021 by Chris Fenske, Head of Capital Markets Research, Global Markets Group, S&P Global Market Intelligence
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